IMF expects world economy to grow a sluggish 3% this year, weighed down
by Iran war but helped by AI
[July 09, 2026] By
PAUL WISEMAN
WASHINGTON (AP) The International Monetary Fund on Wednesday modestly
downgraded its outlook for the world economy this year, citing the
energy shock caused by the Iran war. But the fallout from the conflict
is being partially offset by booming investment in artificial
intelligence and other technologies.
The IMF now expects the global economy to expand by a sluggish 3% in
2026, down from 3.5% last year and from the 3.1% it had forecast for
this year back in April. The fund expects worldwide growth to rebound to
3.4% next year.
Iran responded to U.S. and Israeli attacks Feb. 28 by shutting down the
Strait of Hormuz, through which a fifth of the world's crude oil and
natural gas passes. Energy prices soared, squeezing businesses and
consumers. The IMF now expects oil prices to be up nearly 32% this year
and for global consumer prices overall to increase 4.7% in 2026. That
would be up from 4.1% in 2025 and would mean that two years of progress
against inflation has stalled.
The IMF forecasts assume that the Strait of Hormuz reopens later this
month even though U.S. strikes on Iran resumed and President Donald
Trump declared Wednesday that a ceasefire with Iran was over. They also
assume that commerce through the strait returns to normal by next March.
The world economy has weathered the shock from the war better than
feared,″ Petya Koeva Brooks, deputy director of the IMF's research
department, told reporters Wednesday. The economic damage from the
energy shock has been limited partly because countries could draw on
existing oil stockpiles and because oil-exporting countries outside the
Persian Gulf stepped up production.
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 Countries that produce and export
their own energy and that benefit from AI investment are insulated
from the war's economic damage. Among them is the United States. The
IMF expects the U.S. economy the world's largest to grow a solid
2.3% this year, up from 2.1% in 2025 and unchanged from the April
forecast. President Donald Trump's 2025 tax cuts, big gains in
productivity and a strong stock market are also giving the American
economy a lift.
The 21 European countries that share the euro currency, hit hard by
higher energy prices, are collectively forecast to grow just 0.9%
this year, down from 1.4% in 2025.
China, the world's No. 2 economy, is expected to expand 4.6% this
year, down from 5% in 2025 but a bit faster than the IMF had
expected in April. Weighed down by higher energy prices and a
property market collapse, the Chinese economy is getting offsetting
help from public works spending, a surge in high-tech manufacturing
and booming exports.
India is once again forecast to be the world's fastest-growing major
economy, advancing at a 6.4% clip (down from a sizzling 7.7% last
year) on strong consumer spending.
The IMF is a 191-nation lending organization that works to promote
economic growth and financial stability and to reduce global
poverty.
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